The whole point of having your own fund is because (even if you get advice) you think you can generate a better return than if you had parked your life savings with a fund manager. So here are 10 tips for bumping up the performance of your fund.

1

Brad Callaughan
, a director of business advisers and accountants Callaughan Partners says it’s essential to get good advice from the start.

“Before setting up your SMSF you should have an investment strategy in mind. If you already have a fund and don’t have [a strategy] in place and you’re not getting the returns you want, go back to the beginning, review your investment [plan] and seek sound advice from an expert."

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Understand the type of in­vestments you want to make. Then you can work with your adviser to make informed investment decisions.

Callaughan says that “although you are paying an expert for his or her advice, I still like to educate my ­clients on the investments and the path we are taking. You don’t need to be an expert but you do need to un­derstand what’s happening. It’s your money so you should be taking a keen interest in it."

3

Callaughan reminds investors that this year, you can deposit $30,000 into your super fund on a before-tax basis, or $35,000 if you are over 50.

“Instead of paying tax at your ­marginal rate, if you’re an employee: salary sacrifice, or if you’re a business: deposit up to these limits into your super to pay tax at 15 per cent. So effectively you’re halving the amount of tax you pay and at the same time using the funds in your super account to invest to improve the fund’s performance."

A huge opportunity for people who run their own business is to acquire their business premises through their SMSF. According to
Grant Field
, chairman of Australasian accounting firm MGI, given super funds can now borrow, you don’t even have to save up the full purchase price to buy your premises.

“Better still, you can effectively get a tax deduction for the loan repayments, which are funded through tax-deductible super contributions. Your business will also pay market rent to your SMSF. If you’re in a company structure you get a 30 per cent tax deduction and you pay 15 per cent tax on the rental income in your SMSF, so you’re net 15 per cent better off. If you’re in a trust structure your tax rate may be even higher than 30 per cent and the tax savings might be even greater. If it’s a million-dollar property with, say, a 10 per cent yield, then the tax saving is $15,000 every year."

Field says if you’re over 60 there are further advantages. “In that case, you get a tax deduction for the rent paid by the company at 30 per cent and the super fund pays no tax, so the tax savings increase to $30,000 a year."

Plus, after a certain period, if you decide to exit the business and sell the property, any capital gain on the property is tax free if you’re over 60.

6

According to Field, investing in shares through your portfolio delivers substantial tax benefits. “Even if the member is still contributing to the fund, the tax rate of the fund is 15 per cent. When you receive franked dividends from shares you get a credit for the 30 per cent tax paid by the company on your dividends. This more than covers the 15 per cent tax rate paid by your fund and the additional 15 per cent comes back to the fund as a tax refund or can be offset against any other income tax the fund may have, such as tax on contributions made to the fund," he explains.

7

According to
Michael Miller
, financial adviser, MLC Advice Canberra, if you’re older than 60, start ­paying yourself a pension. “Super funds already pay a low tax rate of 15 per cent. But if you start a pension when you’re over 60, the income ­payments will be tax free, and you won’t pay any tax on earnings from investments that back the pension. So if you have a $500,000 pension account that is earning 6 per cent a year in taxable income, that’s a $4500 tax saving each year."

8

Miller says your fund could be due a tax refund if you have a high level of franking credits from investments. The sooner you lodge, the sooner the refund will be in your fund’s bank account.

9

“Review your fund’s other investments if you’re going to sell an asset that has made a big gain this financial year," Miller says.

“You could be better off selling an underperforming asset that has made a loss in the same year, to offset the gain."

10

Andrew Buchan
, wealth management and superannuation partner at HLB Mann Judd, says it’s important to make sure you place all the cash you have in the fund in a high interest rate account. “You should be getting at least 3.45 per cent at call," he says.

He also advises considering a term deposit if you have excess cash. “Rates are around 3.6 per cent for three-, four-, six- and 12-month deposits."